The Start of a Comeback for Microfinance?

by Rupert Scofield

The Economist reported this week on a 20-year World Bank study undertaken in Bangladesh* that finds a clear long-term impact on poverty by microcredit, something those of us who have labored in this vineyard have always known, despite the findings of a handful of recent much shorter-term studies to the contrary.

There is actually a way to reconcile these seemingly contradictory studies. The recent short-term studies were undertaken in highly saturated markets and focused on clients who diverted some or even all of their loans into consumption. Microcredit works best when the client uses it to fund a business – versus consumption – and when that business grows incrementally over time, resulting in gradual but steady increases in household income.

On a recent visit to Uganda and Tanzania, I saw dramatic examples of this with two long-time clients of FINCA. But don’t take my word for it, read this recent article by Robert Mendick of The Telegraph who interviewed our client in Uganda:

“Cissy Ssekyewa is FINCA’s shining example of success. Fourteen years ago, Mrs Ssekyewa took out a loan from FINCA of 100,000 Ugandan shillings – less than £25 – and used it to buy foam mattresses being discarded by a local factory. She tore the foam into shreds and made cushions and pillows with it.

Now she employs dozens of staff in one factory and three shops. The business, according to FINCA, is now worth $1 million. ‘FINCA has changed my life,’ said Mrs Ssekyewa, speaking above the hum of pedal-powered Singer sewing machines that surround her.”

Pre-FINCA, Cissy and her family were literally starving to death, living off sales of charcoals that Cissy produced by burning trash in the market and raking out the coals.

In Dar es Salaam, Tanzania, Jane George has been a FINCA client for over ten years. She started a restaurant back then, with a $100 loan and just a few customers. Over the years, her business has grown to the point where she has over 10 employees and over 150 regular customers, a lunch time crowd.   I asked her if she could distill the secret of her success down to one lesson for others wanting to follow in her footsteps. “I invested every shilling of every loan FINCA gave me in the business. I never spent the money on other things.”

Do these stories mark the start of comeback for microfinance? No, they have always been there, and millions like them, just waiting for someone to document them. And the other studies that found “zero impact” of microfinance on poverty? I can’t speak for them. But I think the authors might have a difficult time convincing Cissy and Jane that “microfinance doesn’t work.”


Rupert Scofield, FINCA International’s President and Chief Executive Officer, is an agricultural economist with 40 years of experience in the developing countries of Africa, Latin America, Eurasia, the Middle East and South Asia. As the author of The Social Entrepreneur’s Handbook: How to Start, Build, and Run a Business that Improves the World, Mr. Scofield seeks to inspire the next generation of microfinance leaders and social entrepreneurs. To learn more, visit or follow him @RupertScofield

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